Fortescue — which has a break-even price of $US72 a tonne for...

Fortescue — which has a break-even price of $US72 a tonne for iron ore — has been particularly exposed to the recent downturn in the iron ore price

To a greater extent than FMG, are BHP and Rio stupid? The current dip in the iron ore price is almost wholly due to them ramming up production. They are making less coin in profit per ton from the sale of a finite product by flooding the market. Sam Walsh (Rio CEO) has been salivating (at least in public) about the prospect of iron ore prices dropping further. According to Sam, Rio as the lowest cost producer would remain the last man standing.

This is a stupid and pig-headed boast. If the iron ore price dips down to around $40 which is close to Rio's breakeven price, yes all of its competitors would be taken out of the market but its own profits would be decimated. Rio is currently earning $5 or $6 a share, forgive me I don't have the exact numbers. If iron ore heads near $ 40, their profit per share would get crunched to between $2 to $3 a share. So much for a growth stock.

The increased production by all miners is collectively a stupid thing for the industry from the view point of the producers.